China to strictly limit building of more photovoltaic capacity

China will strictly control the construction of new photovoltaic manufacturing projects to curb excess capacity in the world’s biggest maker of solar panels.

New solar manufacturing that “purely” expands capacity will be strictly banned, the Ministry of Industry and Information Technology said in a statement on its website today. Annual spending by companies for research and development and upgrading equipment combined must be no less than 3 percent of revenue and no less than 10 million yuan ($1.6 million), according to the statement.

Chinese authorities have pledged to cut overcapacity in industries from steel to paper as policy makers seek to reduce the economy’s reliance on investments and exports. A global oversupply of solar panels led to a 20 percent plunge in average prices last year, according to data compiled by Bloomberg.

The government’s previous backing for the solar industry has left at least one factory producing photovoltaic products in half of China’s 600 cities, according to the China Renewable Energy Society in Beijing. China’s solar industry now accounts for seven out of every 10 solar panels produced worldwide, according to data compiled by Bloomberg.